Yearly Costs: Leasehold Edition
Leasehold properties have become increasingly popular in recent years, offering an affordable alternative to freehold ownership.
However, with leasehold ownership comes a range of additional costs that can catch many buyers off guard.
Whether you’re a first-time buyer or an experienced investor, understanding these costs is essential for making informed decisions and avoiding unexpected expenses down the line.
So, let’s dive in and explore what costs you can expect to pay each year as a leaseholder.
Service Charge
Service charges are monies collected to maintain the structure of the building and common parts and cover the cost of any services provided.
These include; repairs, cleaning, lift servicing, garden, on-site staff, utilities, building insurance, managing agent’s fees, in fact any service provided under the lease.
Ground Rent
The amount of Ground Rent payable, will be set out in the lease, it may only be a nominal amount sometimes referred to as ‘peppercorn’ or it may be something more substantial.
The lease will set out how the Ground Rent is increased over the period of the lease and how often this is charged and increased.
Interest charges for penalties and late payments
Your lease will set out if there are any charges for penalties and late payments on the service charge and ground rent.
Contribution to a Reserve/Sinking Fund
Money collected towards major works. The lease will set out whether the landlord can set up a reserve/sinking fund and money must be kept in a trust account.
There may also be other additional charges that you may have to pay during your time as a leaseholder that you need to be aware of:
Licence to Alter
If you wish to carry out alterations within your flat you may be required to pay the landlord’s costs of issuing a licence in advance to carry out the alterations.
Extending your lease
If you wish to extend the length of your lease there will be a cost payable to the landlord. Specialist valuation and legal advice should be sought before embarking on this process.
Our leasehold experts are experienced practitioners who specialise in this work, qualified through The Association of Leasehold Enfranchisement Practitioners.
Solicitors Enquires
When you come to sell your flat there may be a charge from either your landlord or managing agent in providing information and responses to solicitors’ enquiries.
Deed of Covenant / Notice of Transfer
A cost associated with selling your flat and / or providing the landlord with a notice of transfer. Your conveyancer should provide you with details of all costs which will be payable on sale.
Understanding the costs associated with leasehold ownership is essential for making informed decisions and avoiding unexpected expenses, so be sure to carefully review your lease agreement and seek our professional advice if you have any questions.
* Courtesy of ARMA
